Dear Liz: In the last two years, many of my friends and former co-workers have been forced to attempt self-employment, independent contracting, freelancing, etc. None of them had any previous experience working for themselves, and none had personal acquaintances who could provide guidance. Not surprisingly, although many have good business and interpersonal skills, none have yet had success.
Please advise of any websites, books, associations or other resources that suggest what pitfalls to avoid (taxes and benefits have been nightmares for many people I know), how to plan before taking the plunge into self-employment and how to maximize the chance of success.
Answer: An excellent place to start would be “The Money Book for Freelancers, Part-Timers, and the Self-Employed: The Only Personal Finance System for People With Not-So-Regular Jobs” by Joseph D’Agnese and Denise Kiernan, two freelancers who figured out through trial and error how to cope with the erratic incomes while trying to pay for their own benefits and keep the IRS happy. The authors’ system revolves around putting aside a percentage of all income toward these expenses, rather than trying to save specific dollar amounts, which can be tough on an unpredictable income.
Two other great sources include the Small Business Administration website at http://www.sba.gov and Entrepreneur magazine’s site, at http://www.entrepreneur.com.
Your friends also should look for professional groups that can provide networking opportunities with successful freelancers and entrepreneurs in their fields. Nothing beats one-on-one advice and mentoring from those who have figured out how to win the game.